Two financing options

Hello everyone,

we want to buy a house from the 60s, it is still in pretty good condition, our expectations are low, we want to renovate gradually. Right now we are obtaining financing proposals and I would like to have your opinions on 2 options.

House costs: 340000 E
Purchase ancillary costs: 47430 E
Equity: 120000
Financing requirement: 267430

Repayment around 1000 E

I am a freelancer, my wife is employed but currently works only 50% because of 2 small children, but the tendency is increasing (when the children are older).

Now we have 2 different proposals:

a) Combination of annuity loan and KFW loan
Annuity loan:
15 years fixed interest
215000 Euro loan amount
Nominal interest rate: 1.63% (effective 1.65)
Annuity repayment 750.71 E
Repayment p.a. 2.56%

+

50000 Kfw 124 (10 years fixed interest)
1.4% nominal interest rate

OR:

b) Combination of annuity loan and building savings contract
Annuity loan:
15 years fixed interest
200000 E loan amount
Nominal interest rate: 1.8%
Annuity repayment: 633.33 E, 2%

+

Building savings contract LBS Classic N
60000 E savings sum
0.25% interest rate for the building loan
1.3% nominal interest rate for the building loan
1.69% effective annual interest rate [Preisangabenverordnung] from allocation
1.8% nominal interest rate for the pre-financing
Annual interest rate according to [Preisangabenverordnung] pre-financing: 1.865%

Term: payout after 15 years

We also had full repayment loans, but those did not allow special repayments. With the partially fluctuating freelancer income, that is not our first choice.

Thank you very much in advance.

What about a longer fixed interest rate period? With today's interest rates, I would prefer a fixed interest rate of 20 years or more.

We assume that we can manage the special repayments reasonably well. Maybe not always 5%, but if there is a year with 2% in between, it doesn't really matter on average. I have an Excel sheet according to which, with the loan amount of the annuity loan from variant a), we would be done after 14 years with 4% special repayment.

After 10 years, the remainder of the KFW loan (which will then be a bit over half) would have to be refinanced. And that, if I understood correctly, with the same bank? Is that the catch with the KFW?

we want to renovate gradually.

We assume that we can manage the special repayments reasonably well

Of what? You want to renovate little by little!
Usually, only one thing is possible: renovate or make special repayments from the earned money.

As we have saved money in recent years, both should be possible. At least if it is within the around or just under 5% special repayment limit. We would not be able to manage 10% or not regularly, so we did not request that either.

Oh, the banks we inquired with currently do not offer a 20-year fixed interest rate. Even if we could manage "only" a 3% special repayment, the loan would be paid off in 16 years, and the remaining debt after 15 years would be 13,279 E (although, would a bank then be found for that??). That's why I think it wouldn't be worthwhile to look for financing for 20 years.